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5 Things You Should Not Confuse Business Performance Management With
5 Things You Should Not Confuse Business Performance Management With
April 24 2009
If you search for business performance management (BPM) on Google, you'll get around 700,000 results. Out of this huge number of results, you will presumably refer to a popular source—Wikipedia. According to Wikipedia, BPM is “a set of processes that help organizations optimize their business performance.” The same source affirms that some people see it as the next generation of business intelligence (BI). Both of these explanations—unfortunately—lack clarity.
Going back to the Google search, there are a few near-synonyms for BPM that one can choose from: business intelligence performance management, performance management scorecard, key performance indicators, and business performance metrics. Similarly, Wikipedia has four synonyms for BPM as well, including corporate performance management (CPM), enterprise performance management (EPM), operational performance management (OPM), and business performance optimization (BPO).
Confused? Is it BI, a set of processes, scorecards, performance indicators, metrics, or are all these equally valid parts of BPM? Since we intend to write a series of articles on BPM, we thought we might start this thread a bit differently and first try to explain what BPM should not be confused with.
1. Business Performance Management (BPM)
There is always a kind of confusion when using the same acronym (BPM) for different software packages (i.e., business performance management and business process management). In spite of the undoubted links between these two application types, they differ greatly for the majority of software users and IT professionals. Broadly speaking, a generic business process management system allows analysts and business managers to design and model business processes in a graphical and descriptive view, then execute them, monitor the processes, and finally, modify or optimize them.
There are similarities between business process management systems and enterprise application integration software and workflow automation solutions. By the way, notice yet another BPM abbreviation here: business process modeling, which is a substantial element of business process management. This is basically a business process capturing, visualizing, and description technique (or set of techniques) that provides companies a clear view on processes and helps them to analyze these processes in order to improve them.
2. Business Intelligence (BI)
Is BI part of BPM? Definitely! You can make any kind of business decision based on accurate information, and the efficient way to get that information is through a BI tool. Still, BI is not enough. The best BI tool in the world can give you the greatest dashboards, graphs, ad hoc reports, and so on, but they are completely useless unless you have a good idea of what to do with them.
It is safe to say that BI is the framework or the tool that will help you improve your business, but it will not complete this task for you. This is where BPM comes into play. A BPM provider should be able to support you in defining your business processes and objectives, as well as the metrics or key performance indicators (KPIs) you need to follow. Furthermore, your BPM provider will assist you in building the tools you need in order to extract the right data from the right place and then interpret it according to the already defined objectives.
3. Balanced Scorecard, Business Process Measurement, and Key Performance Indicators
When talking about business performance management, we should clearly understand that it is possible to successfully manage “something” as long as that “something” can be measured. In other words, in order to estimate how well your business is doing, some formal methodologies, criteria, and metrics are required.
However, it is not enough to estimate your company’s achievements using financial criteria only. There are other important activities which (while difficult to quantify and evaluate) are necessary to compare and evaluate in order to have a more complete picture. Balanced scorecard, business process measurement, and KPIs were developed as a systematic approach to help managers of all levels effectively control the company or departments within the company and to be able to quickly react to market and environmental changes and challenges.
These three concepts are really closely related to each other, but represent different views of the same process. Balanced scorecard is used mostly by the top management level of a company to monitor overall business performance towards strategic goals of the company. Mid-level and operation management usually use business process measurement parameters to visually examine routine and day-to-day processes towards short-time or current goals of the department or organization. Both of these methods utilize KPIs as a metric to count and analyze countable and often uncountable criteria. Those indicators usually look like set of diagrams and graphs that fluctuate dynamically depending on how the numbers change. Sometimes these sets of diagrams are called dashboards (using the analogy of a car or plane dashboard with a number of gauges on them).
4. Total Quality Management (TQM), Lean, and Six Sigma
At a first glance, these mechanisms, methodologies, and concepts can be referred to as different types of business process management. They reflect different views of the same core business processes improvement and talk about product, process, customer satisfaction, quality, and practical techniques to plan, organize, and control this process. They all consider business processes improvement as a global strategic goal and, as a result, companies achieve better financial numbers.
Certainly they are not the same things. While there are plenty of books, articles, and Web sites available to help readers understand the concepts, at the same time the non-dedicated reader who isn’t a professional in these concepts can easily become confused in this ocean of information.
Generally speaking, total quality management, lean, and six sigma as methodologies are much wider and deeper in substance than business performance management—which is a very useful and helpful way to estimate the current business and financial situation of an organization, as well as providing food for thought for managers at all levels to assist them in optimal decision making.
5. Reporting and Analytics
An in-depth explanation of the difference between BI versus reporting and analytics exceeds the scope of this post. So we’ll make this part short but sweet: analytics is complex reporting, while BI is a sophisticated reporting and analytics tool.
Most accounting, enterprise resource planning (ERP), customer relationship management (CRM), supply chain management (SCM), product lifecycle management (PLM), solutions offer reports, and most of them even allow you to do analysis on sales, purchases, productivity, and more. As our jobs are becoming very information-intensive, reporting, analytics, and BI are essential to today’s workforce.
Reporting and analytics tools do not always provide data in a format that can be used by a BPM product. Oftentimes, information comes from a variety of sources and—just to make things worse—different tools are used to extract it. A BPM tool should be able to gather all the required data from all available sources and convert it into a format that can be used in the decision process.
To Be Continued…
Five years ago, the
BPM Standards Group
was created by IBM, SAP AG, Hyperion Solutions Corp., IDC, Meta Group, The Data Warehousing Institute, and BPM Partners Inc. One of its goals was to properly define BPM and to create standards for it.
It is noteworthy that at about the same time, BPM was a top priority for many chief executive officers (CEOs) and analysts saw it as a growing market with huge potential. Whether this happened or not will be discussed in a future blog post.
For now, we hope we succeeded in dissipating at least some of the confusion surrounding BPM—business performance management, that is!
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